1. FUNDRAISING REMAINS STABLE
Despite the global uncertainty, domestic fundraising remained steady in 2016 at
A$3.2 billion ($2.4 billion; €2.1 billion) collected by five private equity funds, compared with A$3.7 billion raised by nine funds the year before, according to PEI.
2. BUT NEW GPS ARE EMERGING…
Sydney-based Adamantem Capital, established by former Pacific Equity Partners managing directors Anthony Kerwick and Rob Koczkar, hit their first close on its debut vehicle in December, targeting a reported A$600 million. Former TPG Capital co-head of Asia Ben Gray and former TPG partner Simon Harle are also reportedly fundraising to invest in Australia and New Zealand. Other new players include Archer Capital alumni Andrew Gray and Rishabh Mehrotra who have established Potentia Capital.
3. …AND LOOK SET TO SHAKE THINGS UP
The arrival of these new players is expected to create “the most vibrant and active private equity community that Australia has ever seen”, according to Tim Gordon and John Williamson-Noble of Sydney-based law firm Gilbert + Tobin. “I think the Australian landscape now is very interesting,” says Jenny Newmarch, portfolio manager – growth assets, First State Super.
4. TECH OPPORTUNITIES ARE TEMPTING
Australia's Future Fund is among those targeting tech start-ups, encouraged by new tax incentives for early stage investors. Superannuation funds First State Super and Hostplus Super have also set up an A$200 million venture capital fund with local tech entrepreneurs for domestic growing companies.
5. TOUGHER REGULATIONS ARE A SOURCE OF CONCERN
Especially moves to force the local superfunds to enhance fee and costs disclosures due to take effect in October, which general partners may struggle to comply with, private equity executives say. There are also fears that foreign investment rules could hinder the ability of overseas firms to acquire Australian assets.
6. CHINA IS A KEY INVESTOR
China is Australia’s largest trading partner and a key source of capital, with Chinese-backed deals accounting for 76 percent of overall transactions in Australia in 2016, according to KPMG and the University of Sydney. “There’s been a substantial increase in healthcare acquisitions, as well as those in food and agriculture,” says Xiong Jin, a Beijing-based partner with King & Wood Mallesons.
7. MID-MARKET REIGNS SUPREME
Steve Byrom, head of private equity at Future Fund, says Australia is a small to mid-sized enterprise market: “That is where Australian private equity firms have made great returns historically.” “The Australian mid-market also tends to be less competitive than the US or European equivalents resulting in lower entry valuations,” adds First State Super’s Newmarch.